News in Brief: Several Studies Praise Direct-Loan Program

Advocates of the new federal direct-lending program for college
students praised its savings and simplicity at a Senate hearing last
week, while three agencies reported that their studies found no major
flaws in the program.

"It is rare...that we have such satisfied customers and such
positive results," Madeleine M. Kunin, the deputy secretary of
education, told the Senate Subcommittee on Education, Arts, and
Humanities.

Cornelia M. Blanchette, the associate director of education and
employment issues for the General Accounting Office, revealed that
about 100 of the 1,495 schools slated to participate next year have
dropped out, suggesting their actions were spurred by concerns about
the program's future under a Republican-led Congress. All of the
schools now participating plan to remain.

The G.A.O. now estimates that direct loans will account for 28.7
percent of loan volume next year. Pending legislation would cap
participation at 40 percent.

The G.A.O. also reported that representatives of 38 schools it
polled were "very pleased with direct lending and with the assistance
and guidance provided" by the Education Department.

Also last week, an audit issued by an independent accounting firm
found the new loan program had no major weaknesses. But it urged the
department to improve its cash-management procedures as well as its
oversight of colleges' recordkeeping.

The previous week, the Advisory Committee on Student Financial
Assistance, an independent panel that advises Congress, concluded that
direct lending is "a feasible loan program with important, desirable
features for institutions and students" and that it has been
implemented smoothly.

But the advisory panel also warned that current policy makes it
difficult to prevent issuing multiple aid awards to the same student
and to keep poor-quality schools or institutions with high default
rates from taking part.

Budget Cuts: The Senate opened debate last week on a
Democratic-sponsored amendment that would restore $1.3 billion for
education and social programs to a bill that seeks to cancel $13.5
billion in fiscal 1995 spending.

Half of the cuts, known as rescissions, would offset $6.7 billion in
disaster relief. Congressional leaders say the rest would go toward
deficit reduction, and the Senate passed an amendment that would
require this.

The bill would cut $704 million from the Education Department's
budget for the current fiscal year. A counterpart bill passed by the
House last month would cut $17.1 billion in 1995 spending, including
$1.7 billion from education.

The Senate Democrats' amendment, however, would restore full 1995
funding for the Goals 2000: Educate America Act, the Safe and Drug-Free
Schools program, Title I, impact aid, and the AmeriCorps service
program.

"It's a partial restoration, but also a recognition of our spending
limits," said Sen. Tom Daschle, D-S.D., the amendment's sponsor.

Earlier, the Senate rejected, 48 to 46, an amendment that would have
restored $11 million in proposed cuts to the Star Schools
distance-learning program and an education-technology initiative by
cutting defense spending.

Senators also rejected, by a vote of 68 to 32, an amendment that
would have offset disaster relief with a 1.7 percent across-the-board
spending cut instead of specific spending cuts.

Aid Report: Giving disadvantaged students more aid in the form of
grants rather than loans increases the chance that they will graduate
from college, a new General Accounting Office report says.

The study is a companion to an earlier financial-aid report that
focused on minority students.

The new report also recommends that Congress consider a pilot
program in which grant aid would be "front loaded" in students' early
years of college and reduced later. Some observers argue that loan debt
is especially intimidating to new students unsure of their ability to
succeed.

Welfare Bill Passes: As expected, the House has passed a
welfare-reform bill that would drastically overhaul federal programs
serving millions of children and their families.

In a 234-to-199 vote on March 24, the House passed HR 4, which would
transfer to the states authority over dozens of social-service
programs, including child-care, child-protection, and school-lunch
programs. (See Education Week, 3/29/95.)

Last week, supporters of the bill received a boost from Sen. Bob
Packwood, R-Ore., the chairman of the Senate Finance Committee, who
said he endorsed the general concept of block grants. The bill is still
expected to face considerable scrutiny as it moves through the Senate
in the coming weeks.

Scholarship Suit: The University of Maryland asked the U.S. Supreme
Court last week to overturn a lower-court ruling that the institution's
race-based scholarship program is unconstitutional.

Last October, a three-judge panel of the U.S. Court of Appeals for
the Fourth Circuit ruled against the Benjamin Banneker Scholarship
Program in its decision in Podberesky v. Kirwan.

While colleges have long used race-exclusive scholarships to
diversify their enrollments, such awards became controversial in 1990,
when a civil-rights official in the Bush Administration declared them
illegal.

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